Global Economics

Ghosn Juggles Nissan's Lineup

The humbled Nissan-Renault CEO shuffles top managers and takes himself out of North America in a bid to revive flagging sales

When Nissan (NSANY) stunned investors in February with worse than expected results for the quarter ending Dec. 31 and a full-year profit revision, Chief Executive Officer Carlos Ghosn came in for some fierce—and rare—criticism from the company's largest shareholders.

Nobody denies that Ghosn has done a superhuman job at Nissan since taking over in 1999. Yet investors wanted to know why he'd maintained that North American unit sales would experience double-digit growth for the six months through March, 2007, when the evidence had long suggested otherwise.

Disillusioned by Nissan's missed targets, investors sent the company's stock down 8.4% in a one-day swoon that erased about $4.7 billion off the company's market capitalization (see BusinessWeek.com, 2/5/07, "Nissan's Stock Gets Blindsided").

Taking Some Responsibility

At the time, Nissan blamed tough market conditions but promised to put things right with a plan in April. "Against an environment of high raw material and energy prices, no pricing power, and continuing weakness in mature markets, our industry faced many headwinds," Ghosn said at the time. "For the first time since 1999 risks outweighed opportunities."

Today, Ghosn appeared to accept what many critics had suggested: that some of the problems were internal. At a press conference in Tokyo, Nissan announced several management changes. Among them, Ghosn will step down as chairman of Nissan's North American management committee. He is replaced by Hiroto Saikawa, executive vice-president for purchasing.

Also of note, Nissan Chief Operating Officer Toshiyuki Shiga, Ghosn's No. 2, will hand over responsibility for Nissan overseas markets to Colin Dodge, currently senior vice-president for manufacturing at Nissan Europe. And Nissan's executive committee will expand from seven to nine members on Apr. 1. "The priority for our new management team is to act decisively on the multiple challenges facing Nissan and to boost our overall performance in 2007," Ghosn noted in a statement.

All About Trucks

Ghosn's decision to relinquish North American duties wasn't unexpected. Analysts say it has been in the cards ever since Ghosn added CEO responsibilities at Renault to his managerial brief at Nissan in April, 2005. "This has been flagged for over a year," says Kurt Sanger, an analyst at Macquarie Securities in Tokyo.

Sanger adds, however, that Shiga giving up responsibility for general overseas markets (which comprise all markets except Japan, the U.S., and Europe) is significant. "It seems like a bit of a demotion," he says. "He was stripped of that responsibility without adding any others."

What is clear is that Nissan still faces key challenges in its most important markets. In North America, which accounts for about 60% of Nissan's operating profits, new models, including the Altima and Sentra sedans, have been well received and are selling well.

But weak truck sales mean Nissan is growing more slowly than some rivals. Through February, Nissan sales rose by a reasonable 4.8% in the U.S., but Toyota (TM) rose by 10.9%.

Back to the Knack

Japan is even more of a challenge. Unit sales fell 11.6% in 2006, compared with 1.3% at Toyota, and, after two more negative months this year, sales have slipped for the 17th consecutive month.

Reports in today's Nihon Keizai, a Japanese business daily, claim output at two Japanese plants will be slashed by 20%. COO Shiga stays as chairman of the Japan management committee. If he can stem falling sales in Japan, his star will rise again.

Macquarie's Sanger adds that the expanded board may improve communication within Nissan and that more changes could follow. Investors hope so, especially if it means Ghosn regains his knack of meeting—and regularly beating—targets.

"[Ghosn] made a lot of very bullish statements about the second half and how sales would grow," adds Christopher Richter, an analyst at CLSA in Tokyo, speaking ahead of today's announcement. "You suspect people were telling him what he wanted to hear, not what he needed to hear." Today's changes suggest a chastened Ghosn has received the message of displeasure from the markets loud and clear.